Sunday, May 31, 2009

A question about appropriate ethical standards for lawyers

Warning - This post comes with my usual - I am not a lawyer - caveat. I am not asking about the legal duties of lawyers in the US - rather about the ethical standards that should apply to them.

I once put on my blog – without comment – a letter to clients written by Francesco Rusciano of the Ponta Negra fund.

I did not think it made sense because the stated returns were not possible with the strategy described. I asked my readers for their views. Bluntly, on just reading two of their letters I thought fraud was a fair guess and so did a fair number of my readers.

That was only marginally interesting to me – this financial market is riddled with fraud and Ponta Negra was only small. What was interesting to me was that Ponta Negra was housed in the same office, shared a phone number and marketing agent with Paradigm Global – a fund of hedge funds owned by Hunter and James Biden. Hunter and James are the Vice President’s son and brother respectively.

Since then Ponta Negra has been closed by a Federal Judge, and is facing civil charges. Francesco Rusciano is facing wire fraud charges. The SEC and Federal Prosecutors are alleging a fraud that I could only guess at. The Biden’s lawyer has stated that Ponta Negra were subtenants. I have summarised the issues surrounding Paradigm Global in this post.

That however is not my purpose today. When I wrote the original post I received threatening letters from Ponta Negra’s lawyers. Douglas R Hirsch, a partner at Sadis Goldberg asked me to destroy all documents I had from Ponta Negra and “certify in an affidavit” that I had done so. This was only a few weeks before charges were laid against Ponta Negra – and almost certainly whilst investigations were ongoing.

Now if Ponta Negra’s lawyers did not have any reason to suspect that investigations were going on into Ponta Negra then I guess the request I got was not obstruction of justice. But this would mean that Douglas Hirsch is hopelessly naïve – because the letters looked prima-facie suspect. Besides Douglas Hirsch read the letters on my blog and thought that I was alleging fraud – which means he thought that I thought the letters were suspect.

So (at a minimum) a lawyer asked me to destroy a document that he thought might be evidence in something he thought that I thought was a crime.

Even if he thought that there was no investigation and that no crime existed doesn’t that constitute an ethical lapse?

15 comments:

Anonymous
said...

Maybe. Don't forget that a lawyer's real job is to shred, in the same way that an accountant's real job is to fiddle the books [this comment is satirical]. That lawyer had a duty to his client. Would YOU hire a lawyer who failed to get shredded all problematic documents that could legally be shredded?

I WISH clients hired lawyers to be ethical. They don't. They hire lawyers to do the best for their clients within the boundaries of the law and being an officer of the court.

I WISH that corporate lawyers were supposed to be setting ethical boundaries for corporations in the same way that in some mythical past accountants were supposed to be conservative bean counters who told you when you were taking too much financial risk.

Regarding prior "anonymous" the original post asked about what ethics of lawyers are APPROPRIATE, not which ones would maximize their labor market outcomes.

Since lawyers in the US (in most countries really) must be licensed to practice (gaining thus a range of "privileges") the state is free to specify the terms (including "ethical standards") that must be upheld to gain the benefit of such a license.

As such, the standard for "legal ethics" becomes normative - what "society" believes it "should be", not what the market determines as optimal for the practitioner.

i'm not sure it's a big deal. for instance, my company (and at least the last four i've worked for) has at the advice of our lawyers put an addendum on all emails out of the company instructing the recipient to delete the email if the recipient is not the intended recipient. that addendum has no legal force at all, but we tell people to do it anyway. sounds like this might just be a similar thing.

I've heard stories from the days of yore about long dead countries that used to have something called ethics and even laws that prevented such things. I couldn't find any reference to these countries on the internet. They're probably just fairy tales.

It is legal to destroy documents, or to follow office procedures for deleting aging documents, so long as there is no known investigation and no real and apparent reason to suspect one. Even when an investigation is taking place, the prosecution of obstruction can be difficult -- Arthur Andersen reversed by the Supreme Court and Frank Quattrone's mistrials come to mind.

Great post. Of course the attorney's conduct sounds intimidating and heavy-handed, and that's fine. But if the attormey actually suggested you destroy evidence, I would suspec that is already considered unethical, at minimum, no matter where the attorney resides. So I would pass the facts you have along to the state bar body that regulates that attorney's conduct, and when you do, tell them you are making a complaint and that you want them to evaluate whether the attorney's conduct is unethical or troublesome. If they don't find a problem with it, then I think your question is a good one -- there ought to be a standard.

I think it depends. We all know what lawyers are, i mean their job is. They need to protect their clients interest so we can't blame them. Though most of the times they are unethical, they should set some boundaries also.

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The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.